The Overnight Report: Doubts Creep In

The Dow fell 64 points or 0.5% while the S&P lost 0.4% to 1379 and the Nasdaq dropped 0.2%.

Will they, won't they: that is the question. Whether 'tis nobler in the mind of the central banks to suffer the slings and arrows of outrageous fortune, or to take arms against a sea of troubles.

Yesterday, Australia seemed to think we're in for something positive this week, or at least decided it might be a good idea to pick up a few beaten down resource names just in case. Wall Street bounced around last night on indecision, before the naysayers won out in the end.

The majority of US commentators still have the Fed staying out until September, and one argument is that Bernanke will not want to move until he sees what Draghi can do. Surely the two have been in conversation though, argue others, and would not a September policy shift be a little too close to the election, thus encouraging accusations of politicking? Recent US economic data have been mixed rather than consistently poor, nevertheless, suggesting the big guns of a full-blown QE3 aren't needed, but perhaps some lesser measure such as mortgage purchases could be on the cards.

Forget it. We'll know tomorrow.

Over in Europe, there is absolutely no doubt economic data are shocking. Last night the eurozone unemployment number came in at 11.2% for June, up from 10.2% a year ago. Of those under 25, 22.4% are out of work. No one is arguing whether or not something should be done, and indeed the ECB, France and Germany have all said "whatever it takes". But this is largely polly-speak, given Germany is still dead against any solution that has German funds being committed without German control ? such as the ESM being granted a banking licence ? and Draghi can only act within the limited ECB mandate.

By Friday we'll know.

Traders can do all the punting. Investors are best to stay out ? if they miss the start of the next bull run (were that to be the unlikely case) there'll be plenty of time to get on later. And the risk of disappointment is high on the other side of the coin.

Last night's US economic data releases were not the stuff of QE necessity. The monthly Conference Board measure of consumer confidence rose to 65.9 in July from 62.7 in June ? it's highest level since April -- with the employment expectation sub-number the major driver. Let's not forget the Fed will have seen the ADP private sector jobs report for July before it makes a decision tonight, but official non-farm payrolls are not due till Friday.

Personal spending for June fell 0.1%, but personal income rose 0.5%. The argument is that consumers are still wary, but with incomes rising and confidence improving, they stand ready to open the wallet at some point, perhaps for the upcoming back-to-school season. The Case-Shiller 20-city house price index for May showed a 2.2% gain, with prices now down 0.7% year on year. That's the smallest yoy reduction in 18 months.

Should we get QE3 from this sort of stuff? The Fed is determined that employment growth is its target, yet employers are citing "fiscal cliff" concerns and related tax policy uncertainty as the reason they are not hiring. What can the central bank do about that?

US June quarter earnings results remain mixed. Last night consumer discretionary heavyweight Coach fell short on revenue and was slammed 18%, while Goodyear surprised and jumped 11% and even US Steel (Dow) was up 9%. Pharma giant Pfizer (Dow) also gained after a pleasing result.

Not a lot there for the Fed to panic about either, so realistically it all comes down to Europe. Beijing appears to have things under control. Will Europe unite? Or will it dither and bitch-fight, as per?

The US dollar index fell 0.2% last night but commodities were on the side of the Fed non-believers, ignoring the currency to post losses. Base metals were weaker, with volatile nickel leading the charge, Brent fell US$2.00 to US$104.20/bbl and West Texas fell US$2.32 to US$87.46/bbl. Gold slipped US$7.20 to US$1615.30/oz.

The rock that is the Aussie is steady at US$1.05.

The SPI Overnight lost 17 points or 0.4%.

It's manufacturing PMI day today across the globe, just to add to the tension, with Australian and Chinese results out in today's session.